Currency Trading Update

The Japanese yen crosses are easily the most popular amongst the leaders in the currency trading portion of the Million Dollar Portfolio Challenge, and as of Monday’s close, contestant number 1 has taken the top spot with AUD/JPY. This is actually one of the least traded currency pairs in the entire contest, but this trader has taken advantage of the pair’s consolidation within a narrowing wedge formation. Meanwhile, contestants 2, 3, and 5 have stuck with GBP/JPY, which was the third most popular pair to trade in the entire contest as of Monday’s close. Finally, contestant number 4 climbed his way higher with GBP/USD, as he was able to profit on yesterday’s GBP/USD rally above 1.50.

Looking ahead to the next 24 hours, it may take some time for the markets to digest this afternoon’s rate cut by the Federal Reserve. Nevertheless, traders should keep an eye on some upcoming economic data from outside the US:

Asian Trading Session
**No key indicators due to be released.

European Trading Session
12/17, 4:30 ET
Bank of England Meeting Minutes, UK Jobless Claims - The minutes from the BOE’s December policy meeting will provide one of the best gauges of where interest rates will go next. During this meeting, the BOE’s Monetary Policy Committee slashed the Bank Rate by 100bps to 2.00 percent, as expected. The key will be to watch the vote count, as a unanimous decision to cut rates and indications that the MPC sees the need for additional rate cuts in the future could lead the British pound to pull back sharply. However, traders should also beware that UK jobless claims will hit the wires at the same time, and they could exacerbate any bearish impact on the British pound from the minutes as claims are forecasted to rise for the tenth straight month and by the most since December 1992.

12/17, 5:00 ET
Euro-zone Consumer Price Index - Inflation pressures are likely to have fallen significantly during November, as CPI is anticipated to drop 0.5% from the month earlier and may drag the annual rate down to a 1-year low of 2.1% from 3.2%. Such a decline would add to speculation that the European Central Bank will continue cutting rates, and could weigh on the euro. However, if we see that CPI does not fall in line with expectations, the euro could rally as traders will speculate that the ECB will stop short of cutting rates again in January in order to await confirmation of easing price pressures.

US Trading Session
**No key indicators due to be released.

Terri Belkas
Currency Strategist,
Forex Capital Markets, LLC

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